Game Character walk through wall, even with Dynamic physics
You Character needs to be dynamic, and the walls/scenery static.
Don't use the "simple motion" part of the motion actuator either. Put it into servo mode (drop down box) or set the linear velocity of the player. (The object needs to be dynamic for these options to appear).

Try playing around with the physics and motion in a completely seperate blend. Try making a prototype with just cubes - this way you'll learn what the various physics options do far better than if someone tells you.

For reference:


Static: It stays still when things collide with it. It will not collide with other static objects
Dynamic: position influenced by collisions and forces, but will not rotate
Rigid Body: position and rotation influenced by collisions and forces.